The most common GST errors that we identify when working on client accounts are usually in the area of Digital Subscriptions so we thought we would provide a summary and refresh on what has GST and what doesn't.
The rules requiring non-resident businesses that supply remote services to NZ resident customers to charge GST on those services have been in place for almost two years and there is still a lot of confusion on what has GST, what doesn't and how to claim GST back if you are a GST registered business.
Remote services include:
digital content such as e-books, movies, TV shows, music and online newspaper subscriptions;
games, apps, software and software maintenance;
online gambling services;
website design or web publishing services; and
legal, accounting, insurance or consultancy services.
As a GST registered business, you shouldn't be charged GST on remote services you purchase from non-resident suppliers if the supply is part of your GST registered business activities and before or at the time of purchase you:
tell the supplier that you're GST registered; and
give the supplier your NZ GST registration number.
If you don't tell the non-resident supplier that you're GST registered they'll charge GST.
Non-resident suppliers don't have to give you a tax invoice and you can't claim back any incorrectly charged GST in your GST return. The exception to this is when the non-resident business treats your GST registered business as an individual customer and charges you GST by mistake. If this happens you should contact the supplier who can either refund the amount to you or issue a tax invoice (when the supply is less than $1,000) so you can claim the refund on your own GST return.
Based on our experience and the documentation that we see on a regular basis across all clients, here is a summary of digital subscriptions and an indication of whether or not there is a GST component to what you are charged.
Here are the key's to making sure that you get the GST on your digital subscriptions right:
If you use a digital subscription for business purposes, advise the supplier that you are GST registered and give them your GST number;
Refer to the documentation or invoice that you receive from the supplier to determine if GST has been charged;
If GST has been incorrectly charged, get the supplier to refund it or for supplies of less than $1,000 get them to supply a tax invoice so you can claim the GST back in your return.
Most important thing is if you aren't sure, have a look at the invoice or documentation related to the purchase. If you the criteria detailed above are not met, then you shouldn't be claiming GST on the purchase.
If you have a question or aren't sure how to treat a digital subscription transaction, touch base with one of the team at Thrive CA and we'll help you work it out.